Bapu and Company vs The State of Madras

K. Veeraswami, J.—This petition is directed against the levy of penalty of Rs. 8,978 u/s 10(d) of the Central Sales Tax Act, 1956. The

petitioner purchased electrical goods between 1st October, IJ958 and 31st March, 1961 but under the C. Forms in Vogue prior to 1st October,

195(r). As the law then stood, Section 8(3)(i) included in the C. Form goods intended not only for re-sale but also for use in the manufacture of

goods for sale of for use in the execution of any contract. This provision was amended with effect from 1st October, 1958 and under the amended

provision use of goods by the assessee in execution of any contract is not permitted. There is no dispute that the forms actually issued to the

assessee were those in vogue as we said prior to the amendment. After the purchase of goods the assessee used them in execution of certain

works contracts which he had entered into. On the ground that in doing so he contravened Section 10(d), the penalty was levied. The majority

members of the Tribunal upheld the penalty. It seems to us that the liability to penalty u/s 10(d) is not an absolute one. It is only where after

purchases of any goods for any of the purposes specified in Clause (b) of Sub-section (3) of Section 8, the purchaser fails, without any reasonable

excuse, to make use of goods for any such purpose that he will be liable to penalty. Possibly because of the old forms issued to him, the assessee

was under a misapprehension that even after the amendment with effect from 1st October, 1958 he could use the electrical goods in execution of

contracts. If it were a case of assessment, he would certainly be governed by the amended Section 8(3)(b). That was what was held by the

Supreme Court in Modi Spinning and Weaving Mills Co. Ltd. Vs. Commissioner of Income Tax, Punjab and Another, . He could not in that case

take cover under the C. Forms which were current prior to 1st October, 1956. But a case of penalty stands on a different footing as the relevant

provision itself provides. It is only where the use for another purpose is without reasonable excuse, the penalty will be justified. Where reasonable

excuse is shown no penalty could be levied. In a similar case that was the view taken by a Division Bench of this Court in Viswanathan & Co. v

State of Madras (1965) 16 S.T.C. 125 : ILR (1965) 2 Mad. 263. With respect, we share that view.